Deputy CEO message to shareholders
2018 marked the 60th anniversary of Aspropyrgos refinery and the 20th year since the formation of HELLENIC PETROLEUM Group. During this year, the Group reported strong results, promoted value adding strategic initiatives and above all achieved improved and safe operations of its production units.
While the financial performance of Refining, Supply & Trading business, being our main activity, reflects developments in international refining environment, it is determined by strategic initiatives in respect of investment decisions and their implementation. The consistently positive results of the last few years are indicative of the strong foundation and reflect the choices made, as well as the successful completion of the strategic refineries upgrade program.
Changing international refining environment
2018 marked a change in refining environment; following a period of low oil prices and strong refining margins, we experienced, once more, increasing oil prices (+31% vs 2017) and lower margins (-10%). In addition, material variable operational costs such as energy costs, recorded a significant increase while CO2 emission rights price for EU based refineries, almost tripled on average vs 2017.
During 2018-19 refineries will be called to transition to the new low-sulphur marine fuels, with significant impact on production operations, trading and expected financial performance. HELPE refineries and especially Elefsina, are in a position to effect this transition without the need for material investments and to continue being a reliable source of high quality fuels for their customers in the region.
Consistent positive financial results and balance sheet improvement
The 2018 reported financial results confirm the positive performance and strong position of the Group in the Greek market. Improved refining operation led total production and sales to record high levels of 15.5m MT (+3%) and 16.5m MT (+4%) respectively. Equally, profitability remained strong for one more year, with Adjusted EBITDA at €730m and Adjusted Net Income at €296m, despite the weaker margin environment.
Improved cash flows, on account of strong results and the sale of DESFA, led to a reduction of Net Debt below €1.5bn and financial gearing to 38%, the lowest since 2009. Furthermore, the successful refinancing of €900m of bank facilities, helped to improve even further Group financing costs and balance sheet.
High dividend yield
This performance supported the Board of Director’s decision to propose the distribution of the highest ever dividend in the Group history, which, including a special distribution from the sale of DESFA (€0.25), amounts to €0.75 per share for FY18 (€229m).
Developments in strategy implementation with focus on growth and competitiveness
The Group’s strategy update evolved around renewable energy sources growth, opportunities in increasing refining profitability, as well as improving operational competitiveness. On that front, progress has been made in designing and implementing energy efficiency projects and the further digitalization of Group operations. With respect to the exploration portfolio in Greece, we saw the expansion in Western Greece, in partnership with international industry leaders, while in Power & Gas we review our strategy according with recent and expected developments in the Greek energy regulatory framework and market.
Safe operations and improvement of environmental footprint
Safety and Environment remain top priorities for the Group. While key safety indicators improved significantly in 2018 to the best levels in the last 5 years and refining air emissions per unit of throughput have recorded material improvement since 2014, we remain focussed and continuously search for further improvements.
Finally, we would like to thank our customers for their trust, our shareholders for the continuous support and the employees of the Group for their continuous effort and significant contribution to building HELLENIC PETROLEUM into one of the most successful companies in the region.
Deputy Chief Executive Officer